Definition
Bitcoin is the world’s first successful cryptocurrency, which facilitates secure peer-to-peer transactions without a central authority or intermediary.
Understanding the term
In a 2008 white paper named Bitcoin: A Peer-to-Peer Electronic Cash System, Satoshi Nakamoto, a pseudonymous person or group, outlined Bitcoin’s concept and presented it as a new online payment system.
The idea behind Bitcoin was to eliminate the need for third parties (central authorities) in transactions. It is the cryptographic proofs, rather than trust, that ensure the integrity of the Bitcoin network.
Peer-to-peer (P2P) networks allow Bitcoin transactions to be made anonymously and use encryption in real-time. Bitcoin transfers between users are monitored and verified through these networks, where bitcoins and addresses are stored in digital wallets. Through the Bitcoin blockchain, users can track and verify transactions among themselves using a proof-of-work consensus protocol.
Takeaway
Bitcoin remains by far the most popular cryptocurrency. The benefits of Bitcoin can be far outweighed by their current drawbacks, and the technology can lead to significant improvements in payment systems.